Ukraine’s embattled state-owned PrivatBank has won a major victory in its war with oligarch Ihor Kolomoisky and his associates for control of the bank and its money after Ukraine’s Supreme Court overturned a lower court's decision ordering the bank to repay the Surkis brothers $250mn of bailed-in deposits during the bank’s 2016 nationalisation on June 15.

“This is the first court victory of Privatbank against the Surkis family in their four-plus years of litigation. Therefore it is a surprise. The ruling complicates Kolomoisky’s current legal battle to challenge the validity of the Privatbank nationalisation. However, this ruling is not an ultimate victory for the bank in the case of the bailed-in Surkis deposits. The family will have the opportunity to turn to the civil courts to recognise the rights, and the outcome of such an attempt is hard to predict,” Alexander Paraschiy of Concorde Capital said in a note.

Depositors in PrivatBank lost their money when the state took it over after finding a $5.5bn hole in its balance sheet. The money was allegedly embezzled by Kolomoisky and his partner Gennady Bogolyubov using a variety of “fraudulent loans and shell companies,” the management of PrivatBank told bne IntelliNews in a recent interview.

The Surkis brothers claim they have no connection with Kolomoisky or his partner and brought a lawsuit seeking reimbursement of the UAH1.1bn ($250mn) they had in the bank at the time of its takeover. Despite widespread evidence to link the Surkis brothers with Kolomoisky the lower court found in their favour and ordered the bank to repay them.

PrivatBank appealed to the Supreme Court, which surprised observers by ruling in PrivatBank’s favour and cancelling the order to pay the money. The general prosecutor had called the bank’s management in for an interview only two days earlier to demand the bank pay out on the claim.

The Supreme Court said the lower courts had (1) overturned the decision of the National Bank of Ukraine (NBU) to recognise Surkis family members as related parties to Privatbank, (2) recognised as illegal the bail-in of their deposits and (3) forced Privatbank to repay the deposits (which the bank has since done). The Supreme Court also ruled that the Surkis family claims fall under the jurisdiction of civil courts, not administrative, Interfax-Ukraine reported.

The NBU welcomed the Supreme Court's ruling in a June 15 press release, expressing satisfaction that it affirmed the Surkis family as related parties to the bank, as recognised by the NBU in 2016.

It noted that Ihor Surkis had been a co-owner of several television networks together with Ihor Kolomoisky, the biggest shareholder of Privatbank in 2016. The Surkis family fortune was estimated at $250mn in 2019 by the annual survey of wealthiest people in Ukraine conducted by the focus.us news site. Kolomoisky's wealth is estimated at $2.6bn.

PrivatBank has not issued a statement but a long interview with bne IntelliNews at the end of last week went into the issue of the Surkis brothers' claim and the battle with Kolomoisky in detail.

“The ruling in and of itself seems positive for Ukraine’s relationship with its Western financial partners, which fully supported the bank’s nationalisation and deposit bail-in approach. So it’s positive for Ukraine’s investment case. At the same time, it does not change the chances for the Eurobond holders of Privatbank to recover their rights to their bonds in the UK courts,” Paraschiy added.